How Can You Check A Money Lender License?
All of us have found ourselves in situations where we needed to borrow money to settle a financial obligation or buy something that couldn’t wait.
In such a case, waiting for your bank to process a traditional loan can be inconvenient, so most people opt for private lending.
In Singapore, the lending business is booming because people prefer to borrow from money lenders for quick cash.
However, unchecked money lending is disadvantageous to the borrower, as it often involves high interest rates and unorthodox collection methods.
If you cannot distinguish between a licensed and an unlicensed money lender, you may fall into the hands of a loan shark.
So if you’re wondering how to check a money lender license, read on to find out.
How To Check A Money Lender License
In Singapore, the Ministry of Law oversees license issuing and reviewing.
A licensed money lender in Singapore is a company that is legally permitted to lend to people for various purposes. Its loan application processes are fast and relatively simple.
While they are likely to consider your credit score and income, licensed money lenders are more lenient with your credit score than a bank.
Moreover, they do not ask you for credit score information. Instead, they get it from the Moneylenders Credit Bureau.
Transacting with an unregistered money lender, on the other hand, is a scary business.
First, the law does not recognise the existence of unlicensed lenders. As such, they can ignore a regulation if they so desire, and the borrower is always at the mercy of their greed.
The number of reports on the illegal activities of unlicensed money lenders is rising. Asking for proof of licensing is no longer enough, as these illegal lenders know how to masquerade as licensed money lenders.
Some even go as far as displaying fake moneylending licenses on their walls to deceive borrowers.
Others create web pages and social media accounts that appear identical to that of licensed money lenders.
Such bogus websites allow them to collect personal information such as phone and NRIC numbers for future scams.
Checking the Ministry of Law’s list of licensed money lenders in Singapore is the best way to proceed when it comes to how to check a money lender license.
This list can be found online. Check that the name of the lender, as well as its license number, office address and website URL match the details in the list.
Licensed money lenders are also required to display their licenses prominently at their place of business.
Deception Tactics Used By Unlicensed Money Lenders
Unlicensed money lenders fool borrowers through deceptive tactics.
To protect unsuspecting borrowers, the police and the National Crime Prevention Council’s X-Ah Long are on hand to apprehend and charge illegal lenders or loan sharks.
Contact the police at 1800-255-0000 or submit an online report at www.police.gov.sg/iwitness if you notice any of the following tactics.
An unlicensed lender can pressure you to borrow more from them to repay another debt.
While this takes the pressure off you for a while, it keeps you in debt longer. Usually, the secondary loan attracts higher interest rates and additional fees.
Undisclosed Insurance Packing
The lender may add an insurance clause to your mortgage note without telling you. Insurance packing may initially go unnoticed, but its financial effects will eventually be significant.
Insurance packing primarily benefits the money lender.
Hidden Balloon Payment
A balloon payment refers to an unusually high fee a borrower pays at the end of the loan. The lender assures the borrower of low upfront payments, but the borrower is likely to struggle to pay it later.
When the borrower can repay the loan ahead of time, an unlicensed money lender may impose penalties, citing business procedures.
False Disclosure Or Bait And Switch
An unlicensed money lender might hide the actual loan cost, risks, or terms – only to reveal them later.
It may tell you about attractive terms, only to let you sign an agreement with a completely different set of terms.
That is why it is crucial to own a full copy of the contract and read it carefully before signing it.
Mobile Phone Scamming
Such scams make use of SMS or WhatsApp.
A lender may send a fake loan deposit message saying that your loan is approved or is in a holding account, even though you did not apply for a loan.
Other lenders may present themselves as customer support to help you in debt consolidation. They may contact you in order to help stop harassment from other lenders, only to do the exact thing themselves.
What Licensed Money Lenders Cannot Do
The best defense against unlawful moneylending is to only take a loan with a legal money lender in Singapore.
The country’s laws bind a legal money lender in Singapore when it comes to moneylending, and there are some things they cannot do – or risk a fine, jail term, or both.
Here are some things that licensed money lenders cannot do.
Push Borrowers Beyond Their Comfort Zone
A Singapore licensed money lender should not advise you to take a loan that you cannot repay.
Instead, the lender should consider your credit score and monthly income, and advise you accordingly. It should not pressure you into signing a contract you would rather not.
Its loan repayment rates should also not worsen your financial situation or drive you to bankruptcy.
Rush Borrowers Into Signing The Loan Agreement
A licensed money lender cannot make you sign documents without giving you a chance to read them. Loan agreements are legal documents that are admissible in a court of law.
The lender should highlight the charges and penalties clearly to avoid misunderstandings and disagreements.
Only Transacting Loans Online
A licensed money lender may advertise or recommend loans via a website or advertisement. It, however, cannot initiate, transact and approve agreements solely via the internet.
A physical face-to-face meet-up allows the lender to verify the borrower’s identity and intention.
In-person interactions also enable the borrower to seek clarification on loan terms and view more offers.
Unlicensed lenders may want to act like the mafia and send dozens of collectors to your residence.
A licensed money lender is not allowed to send a mob for debt collection or other purposes.
Other things a licensed money lender cannot do:
- Harass, intimidate or threaten a borrower
- Cause injury or vandalise property
- Stalk a borrower
How Money Lenders Apply For Their Licenses
The applicant must have taken and passed a moneylender’s test to apply for a moneylending license. The Ministry of Law conducts the test following an online registration and payment of a non-refundable $130.
Following the test, the applicant has to approach the Registry of Moneylenders for application. Lenders make their applications online and must pay a non-refundable fee of $600.
The applicant must fill in the necessary information and submit the documents before approval.
Any other requirements as per the Moneylenders (Prevention of Money Laundering and Financing of Terrorism) Rules 2009 and the Moneylenders Rules 2009 also apply.
Presently, the Registry of Moneylenders has suspended the issuance of new moneylending licenses until further notice.
Reviewing A Money Lender’s License
Reviewing or updating a moneylending license in Singapore is a straightforward process. All you need is a valid license and the necessary documents.
Below are some of the particulars that can be updated:
- Business address
- Business name
- Business contact details
- Business director(s)
- Entities transacting with the business
- Termination of director or persons relevant to the business activities
- Share transfer or allotment
When changing the business address, an approval letter from the landlord of the new location and photographs of the site are required.
Also, the lender will submit the photos of the proposed signage for the business premise, a copy of the tenancy agreement, and a copy of the strata title or property deed.
Regarding the transfer or allotment of shares, the Registry of Moneylenders needs to know:
- The number of shares for transfer or allotment
- The reason for transfer or allotment
- Identification card of the transferee or transferor and their relationship
- The share transference price
- Evidence of the source of funds used
Renewal Of A Money Lender’s License
Renewal of the money lender’s license in Singapore is subject to the past conduct of the licensee.
The following documents are of importance in the application:
- GIRO application form if one does not have an existing GIRO arrangement
- Renewed insurance or banker’s guarantee
- Landlord’s approval
- Copy of strata title or property deed
- Tenancy agreement
Criteria For Excluded Money Lenders
Excluded money lenders are exempt from part or all provisions of section 91(1) of the Moneylenders Act.
Thus, they can operate without a license if they apply for a certificate of exemption. When applying, an excluded lender should submit a write-up containing the following information:
- Description of business activities
- Profile of applicant
- Reason for exemption
- Activities for which one seeks exemption
- Applicant contact details
- Borrower’s profile
- Scope of exemption
- Interests and fees
- Business profile as issued by ACRA
Licensed Money Lenders Are Regulated By The Law
A moneylending license binds the lenders to a particular code of conduct or ethics for the sanity of both the borrower and lender.
However, because competition is stiff in the moneylending industry, many resort to cutting corners by operating without licenses.
So make sure you know how to differentiate a licensed money lender from a licensed one, as well as how to check a money lender license.
As one of Singapore’s top money lenders, Horison Credit offers borrowers the best rates and legal advice. Our loan application processes are fast and straightforward.